Joshua Allen’s lead attorney, Anthony Box, said even if the defense took less time than originally planned, they still proved Ferrum Capital sent all the money it was supposed to send to Collins Asset Group.
Allen and Michael Cox, both of Lubbock, are accused of conspiracy and securities fraud, which LubbockLights.com covered extensively here.
Before Allen’s defense started Monday in San Antonio federal court, prosecutor Joseph Blackwell challenged one of Allen’s witnesses. The forensic accountant hired by the defense ended up limited as to what she could say as one of Allen’s witnesses.
Allen’s other witness – his mother-in-law Connie Curry, who worked for Allen’s Ferrum Capital – told the jury she was stunned when she went to a meeting with the FBI to help them investigate Collins Asset Group (CAG) but found out they were also investigating Ferrum.
Curry also denied altering an investment document presented by prosecutor Joseph Blackwell. According to Blackwell, the meta data showed a “Connie” made the change.
Box wished Alicia Alvarez, the forensic accountant hired by the defense, could say more, he said.
“We were limited on what we could present and wish we could have presented more,” he said.
Allen and Cox are accused in civil lawsuits of running a Ponzi scheme – meaning investors were paid from new investors rather than legitimate business activity. Allen and Cox pleaded not guilty in the criminal trial and denied wrongdoing in the lawsuits.
Allen’s defense rested Monday. Michael Cox, his co-defendant, also rested his defense Monday. Closing arguments are set for Tuesday with the jury getting case around lunchtime.
Debate over what she could, could not say
Before the jury could hear the start of Allen’s defense case, prosecution and defense attorneys debated if some of the forensic accountant’s report would be allowed.
It set up a rare agreement between the prosecutor and Cox’s defense attorney.
Joseph Blackwell, assistant United States attorney, said part of Alicia Alvarez’s testimony was based on what Allen told her.
It was a Crawford issue, Blackwell said, referring to Crawford v. Washington. The Sixth Amendment’s Confrontation Clause prohibits the government from using co-conspirator’s statements without giving the defendant an opportunity for cross examination.
If Allen cast an aspersion on Cox on what he told Alvarez, that created a problem, Blackwell said.
“Do you agree with Mr. Blackwell? Judge Fred Biery asked Michael Gross, Cox’s attorney.
Gross, turned toward Blackwell, smiled and said, “I didn’t think I’d say this, but yes.”
Box said what Allen told Alvarez was a small part of her report, saying 90 percent or more of her report was based on bank records or spreadsheets, not information from Allen.
“If the information conflicts with bank data, we rely on bank data. She talked to Allen one time,” Box said.
Blackwell also brought up some of the information connected to her report came to him late, which frustrated the judge.
“The court’s had a concern about the midnight hour and here’s a report and I’m concerned about that. I may not let her testify at all because of the timeliness,” Biery said.
Alvarez must testify on what she saw, not heard, the judge said.
The judge and attorneys then started going through charts to be used during her testimony and a number of them were denied or had lines redacted based on information coming from Allen.
The discussion and review process took close to an hour, then the jury was allowed to enter.
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Netting is the multi-million-dollar question
Box asked if Alvarez worked on cases with allegations of Ponzi scams and she said yes.
She went over a dozen bank accounts – two from the Allen Financial Agency and ten more from Ferrum entities, saying she got the records from Gray Reed, one of the two law firms representing Allen.
During the prosecution case, it said Ferrum Capital brought in $67 million from investors but only sent $47 million to CAG.
The government didn’t account for “netting,” and Ferrum sent around $63 million to CAG, Alvarez said.
Netting is the combining of multiple debts, payments or transactions into a single amount.
Alvarez went over a lot of numbers. To illustrate netting, she talked about $2,265,109 owed to Ferrum from CAG for investments that matured. New money Ferrum was supposed to send to CAG was $2,192,260.
The difference was $72,849 that CAG paid Ferrum, she showed, which she described as netting.
Part of the prosecution case showed a list of Ferrum investors with a column listing yes or no if the money went to CAG. The defense said the money did go to CAG, but because of netting it wasn’t clearly tied to those names.
Blackwell asked Alvarez if she spoke to investors.
She didn’t know what investors were told and that was not part of her analysis, Alvarez said.
Blackwell asked if CAG could make payments without new investor money and Alvarez responded she did not review CAG records.
Blackwell pointed out Alvarez’s analysis for two of the dozen bank accounts she studied started in January of 2023 and asked why she didn’t have information for the account from when it began in the previous October.
He pointed out $300,000 that came in from that time.
Curry tells when CAG stopped payments
Before Curry took the stand, she was asked if she was aware her testimony could lead to her being charged but said she was ready to testify.
Curry is now retired after doing administrative work for her son-in-law at Ferrum Capital from 2017 to 2024.
She told Eddie Mendoza, a member of Allen’s legal team; she worked with agents to facilitate contracts and with CAG to make sure things were done properly.
Mendoza asked her who drafted the contracts and she said a Lubbock attorney.
Curry handled “hundreds” of what they called “placements” with CAG and for years didn’t have a problem, she said.
That changed on June 14, 2022, when she received an email from CAG saying they had not seen a report from Allen. Another time she was asked for a projection from CAG for the next three months, which she said was unusual and they’d never asked for it before.
Then in the summer of 2023, CAG payments to Ferrum stopped.
“I was very agitated … it was very stressful to me. I have to send funding to custodians to get funding to clients,” she said.
Ferrum sent letters to clients that fall explaining what had happened, she said.
Curry also invested in Ferrum Capital in 2022, she said.
Mendoza asked if she felt pressured or forced to invest. No, she said, adding she lost money.
Curry reached out to the Texas Attorney General’s office, asking them to investigate CAG for stealing money from Ferrum. That led to a meeting with the FBI that Curry said took a twist, upsetting her, she said.
Curry spent six-to-seven hours at the meeting with someone from the FBI, IRS and Department of Justice.
“When I got back to the car, I couldn’t believe it was six-to-seven hours. I thought the government was investigating CAG,” she said, explaining how she showed them Ferrum contracts and how their process worked, she said.
Then they started asking about her role.
“I was concerned they were not just looking at CAG,” Curry said.
A transcript she later saw from that meeting was not accurate, she told Mendoza.
Then Blackwell started his long cross examination referring to that previous meeting and transcript.
“The question was asked; was it wrong for an investor to pay for another investor without their knowledge or consent and you said, ‘yes,’ So you’re now saying it’s permissible?” Blackwell said.
“I don’t understand your question,” Curry said.
Blackwell pressed again, asking if it was wrong and Curry said yes.
Discussion moved to when CAG stopped making payments. Ferrum reached out to CAG and then started working with attorneys to get payments.
Blackwell brought up a $250,000 check from Pamela Herndon and wondered why they were taking money in after CAG payments stopped.
“We continued business as usual,” Curry said, believing they would fix things with CAG. “Josh and Mike were working with people.”
Blackwell continued to discuss how they took in money after CAG stopped payments.
“You have this completely wrong,” Curry said.
Blackwell asked about money that came in after Ferrum stopped payments and if it was waiting for resolution or was used to pay other investors or the defendants.
Curry did not direct money, she said.
Blackwell also pressed her on the 10.75 percent that Ferrum took off the top of an investment before it went to CAG.
“$100,000 comes in and $89,250 goes to CAG, coming off the top of the principal going to buy bad debt,” he said. Earlier testimony from witnesses said they were told CAG would pay the 10.75 percent and it wouldn’t come off in the beginning.
“I have no control over debt buying,” she said.
Blackwell asked if – as an investor – she was told about CAG being sued in 2020. She said no and started to say more, but Blackwell said she answered.
He asked if she knew about CAG paying out $15.8 million in that lawsuit, adding, “You didn’t know if CAG had cash to make payments?”
“How would I?” Curry said.
“Precisely,” Blackwell said.
“If CAG doesn’t have the money it has to come from someplace, correct?” he said.
“I have no idea,” Curry said.
“You didn’t know as new investors’ money comes in if goes to other Ferrum Capital investors?” the prosecutor said.
“I did not know that,” Curry said.
“If money was going to other investors, that would be wrong,” Blackwell said.
“I have no idea where you are headed,” Curry said.
That’s when Judge Fred Biery cut in and asked Curry if money from a new investor being used to pay other investors was wrong.
“Correct,” Curry said, “I answered that.”
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Blackwell asked about other parts of Ferrum operations and Curry made it clear she mostly processed contracts, tracked deposits amid other duties.
Then he asked about a promissory note going to Vantage, which provides custodial services for investors.
He presented a note showing money going to Vantage, but a later version of the note showed money going to Cold Moon Holdings.
It’s a company owned by Paula Vacek, a friend of Brooklynn Chandler Willy, who admitted in court Thursday she laundered money for Willy through Cold Moon Holdings. Willy was Ferrum’s San Antonio affiliate.
“How did this note get changed to going to Vantage to go to Cold Moon Holdings?” Blackwell asked.
“No knowledge of it,” Curry said.
“PDFs have meta data. You can see who changed it,” Blackwell said, saying on October 19, 2021, the meta data said, “Connie modified this note.”
“I did not. I did not know Cold Moon Holdings,” she said, adding she learned about it later.
After Blackwell finished his cross examination, Mendoza asked Curry if she was ever asked to alter any note.
“Not to my recollection,” she said.
Then he asked if Allen was on the email chain about the document and she said no, but Mike Cox was.
